TIFIA-Backed, Privately-Operated Texas Toll Road Flirts With Default

It’s been nothing but headaches for Texas State Highway 130. The road — or rather, SH 130 Concession Company LLC, which operates the road — got a credit downgrade to junk bond status in April, and now it’s been deemed even junkier with another downgrade from Moody’s last week. Traffic projections for the road failed to materialize, and so did the expected revenue. Now, the road could end up defaulting on its debts — including a $430 million federal loan.

The Austin area's SH 130 is at risk of defaulting on its loans next year. Photo: My SH 130

Traffic has been light on the road since it opened a year ago, causing TxDOT to reduce toll rates. Revenues dropped even lower. The operator also convinced the state to give the road the country’s highest speed limit — 85 miles per hour — to lure daredevils onto the road. No dice.

SH 130 is the only part of Texas Gov. Rick Perry’s outlandish Trans-Texas Corridor fantasy that ever got built. The misguided scheme sought to facilitate NAFTA commerce by building a corridor up to a quarter of a mile wide with separate rights-of-way for trucks, passenger cars, freight rail, oil and gas pipelines, and high-speed rail. Luckily, public opposition killed the project.

The 41-mile southern section of the 91-mile SH 130 was largely built, maintained and operated by Madrid-based Cintra Concessiones de Infraestructuras de Transporte. Cintra owns 65 percent of the Concession Company, while San Antonio-based Zachry Construction owns the rest.

Moody’s writes that the location of SH 130 should draw traffic from the busy NAFTA route I-35. And yet, the credit rating agency is expecting the Concession Company to use most of its last remaining reserves to pay its debt service in December and to default come June 2014. Moody’s has downgraded the loans – including the TIFIA loan — from B1 (“judged as being speculative and a high credit risk”) to Caa3 (“rated as poor quality and very high credit risk”), with a “negative” rating outlook. It doesn’t have far to fall — there are only two lower ratings than Caa3.

The TIFIA loan was signed in March 2008, long before U.S. DOT was forced to stop considering project merit when awarding loans. Credit-worthiness is now the only factor U.S. DOT is allowed to consider, and this project is clearly in big trouble on that front. The first toll road ever financed with a TIFIA loan, California’s South Bay Expressway, was also TIFIA’s first default, in 2010. Perhaps toll roads aren’t as good a bet as was assumed.

If the SH 130 Concession Company does default, as expected, TxDOT might take it over, and could begin to operate it as a freeway instead of continuing to try to charge tolls. TxDOT has already spent public funds trying to increase traffic on SH 130 by advertising the road and subsidizing the toll reduction. Meanwhile, TxDOT’s 50-mile section of SH 130 is also losing money. Taxpayers have already bailed it out to the tune of $100 million, according to The Examiner.

The road’s failure is also becoming a platform for critics of public-private partnerships, who point out that the public ends up footing the bill if a privately financed piece of infrastructure goes belly up.

The website for the road features a logo with “SH 130” and a mini Texas flag surrounded by a heart and asks, “Can You Love a Road?” The lesson from SH 130 is that it’s not only unloved, it was also unneeded in the first place.

This just proves motorists aren’t willing to pay much for a faster, less congested trip. Since the highway is mostly empty they might as well raise the limit in the hopes of attracting more users. Remember also that while 85 mph maybe the highest legal limit in the nation, there are many highways in Texas posted at 75 or 80 mph. People won’t pay much for a lousy 5 or 10 mph more. Raise the limit to 125 mph or whatever maximum speed is safe given the curve radius.

Dan

Obviously this writer has never sat on 35 between atx and satx… The congestion is awful and a fender bender can lock it up easily. Something needed to be done. Once it turns into a freeway, the highway will seem brilliant.

AlexB

The Trans-Texas Corridor is not inherently bad as this article would claim, only unpopular. I-35 is a a very busy passenger vehicle corridor that is often clogged with freight trucks transporting goods to/from Mexico to the rest of the USA. Building a corridor away from the cities that creates a new route for freight trucks, freight trains, and high speed rail makes a lot of sense to me. Because it was cancelled, not all we’ll get is a road and no rail. It’s unclear how that’s preferable. 130 was built where it was because it’s flat and easy to build, but there are no major destinations along it’s route. I-35 will continue to get more and more congested and the use of 130 will eventually go up. Of course, the builders will have long since gone bankrupt and Texas will be left with the debt.

tx trk drvr

I’m a truck driver and my company uses EZ Pass for toll roads. If Texas would get on that system I can see a lot of the trucking companies using the toll roads in Texas. Without having the EZ Pass, there’s no way to get a receipt so the driver can be reimbursed by the company that they works for. With EZ Pass you don’t need a receipt it’s automatically billed to the company. You may get a receipt when you pay the bill but I need a receipt within a few days after I deliver the load to get reimbursed or else my company will not reimburse me.

Lynn Downs

I myself am very grateful for the 130. It gets me to my loved ones and back in an fast following manner. After going through Waco and Temple coming from Fort Worth it is like a smooth sailing new friend reaching my home city of Corpus thank you. Lynn Downs

flora68

There’s a safety problem, aside from the obvious. Feral hogs; they’re all over the place and have caused some grisly high-speed collisions on 130.